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Monday, March 14, 2016

Reconciling Some Things That Have Been Bothering Me The Past 48 Hours; The "Boiling Frog" Metaphor -- March 14, 2016

This is very, very "esoteric," probably not worth posting, but it's something that's been bugging me for the past 24 hours or so. I let Don know it was bugging me. Coincidentally, and certainly with serendipity, Yahoo!Finance has provided a clue to the likely answer to my conundrum.

The first question has to do with why has electric usage declined so much under the Obama administration? What accounts for the significant drop. The population of the United States has increased over the past six years, and the number of electric items/American has certainly stayed the same, but more likely has increased.

If you want to see what I'm talking about, see this post or simply look at the graph below:

I tried explaining this to myself various ways including the increasing amount of electricity provided "off the grid" but that couldn't come close to explaining the decrease shown in the graph above. Something else needs to be found to explain the graph above.

[You know, that graph above is incredible when you think about it; leave it as it is and the Bush/Obama separation is impossible to miss. But then do this, remove the two outliers (the years 2009 -- recession -- and 2010 -- stimulus following the recession) -- and you have this:

Wow, that really stands out. Especially when one remembers the trillions of dollars in stimulus and all the action (or inaction) the Fed has taken for the past six years to get the economy on track.

Break, break.

The second thing that bothered me is a much more difficult question (at least for me), but there's probably an explanation for that also.

So, let's begin.

First question: what explains the significant drop in electricity sales during the Obama administration?

The answer has to be connected with manufacturing in the United States. Even the EIA suggests that a decrease in manufacturing is one of the explanations (if the EIA were not being politically correct as an arm of the Obama administration, I think the EIA could have provided this answer).

It is coincidental and pure serendipity that Yahoo!Finance answered the question for me late this afternoon. Look at the size of the loss of manufacturing jobs under the Obama administration (yes, I know it goes back to 2005. If the US Department of Labor provided this chart as is, it would make sense that another arm of the Obama administration would take this back to Bush's second term to obfuscate the issue; if Yahoo!Finance developed the chart, one can come up with all kinds of ideas why they took it back to 2005).

Folks can argue about the degree to which this loss of manufacturing occurred under the Obama administration, the war on coal, the killing of the Keystone XL pipelines, and the incredible number of new EPA rules and regulations in the past few years would explain much of it.

In stark contrast, under the Bush administration, 2005 - 2009, electric usage was up significantly, suggesting that the loss of manufacturing associated with decrease of electricity use occurred under the present administration.

On another note, the mass media keeps talking about the Bakken bust. Whatever is going on in the Bakken pales in comparison to a 25% loss of manufacturing jobs in New Mexico and New Jersey; a 20+% loss of manufacturing jobs in Rhode Island, West Virginia, and Delaware, and additional huges losses in Mississippi, Florida, and Illinois.

The Bakken bust occurred over a very short period, measured in months, and across a very, very small geographical area. It was, therefore, impossible to miss. In addition, "everyone" knows booms will eventually end. Further, boom and bust cycles are well known in the oil and gas industry.

The loss of manufacturing jobs under the Obama administration occurred over several years and across a huge geographic area. It was not as "exciting" as the Bakken boom. The media didn't see it coming and didn't even note it while it was happening. Part of that is because the mainstream media could never report honestly on the Obama economic policies. But if one wants to take politics out of this, the reason the media missed this may have more to do with the "boiling frog" metaphor.

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The Second Question

Now for the bigger question. How can one reconcile the huge loss of manufacturing jobs and the huge decrease in electricity use under the Obama administration and yet the US wealth increased significantly under the current administration?

Note how much US wealth has increased over the past four years. It has been quite impressive to say the least. So, how do we explain the "discrepancy"? Despite the huge loss in the number of manufacturing jobs the wealth of the US has increased significantly over the past four years. How can we reconcile the loss of all those manufacturing jobs -- look at those percents again, in the chart above -- with continued huge annual increases in US wealth.

Most folks would argue that the amount of global manufacturing has not changed all that much over the last few years; whether it has decreased a bit (Chinese economy?) or increased a bit, overall global manufacturing probably hasn't changed all that much.

This is the answer. The US has sent a lot of manufacturing jobs overseas. But the companies that are doing the manufacturing, say GE and Ford and others, are still headquartered here in the US. The corporate officers and staff are doing very, very well. The companies are doing very, very well (better than if they had kept the factories in the US). The shareholders of these companies have been doing very, very well (we're still in a bull market).

It's no different than what "we" saw during the golden age of the British Empire. The Brits back home were becoming wealthier and wealthier on their colonies overseas. They were called colonies then; today we call it something different. But the results are the same.